Sizzling prices heat up wage talks in Argentina

BUENOS AIRES (Reuters) - A stagnant economy and one of the world's highest inflation rates are making Argentina's annual wage talks thornier than ever this year just as President Cristina Fernandez turns her attention to mid-term elections.

Fernandez, who hails from the left of the Peronist party that has dominated Argentine politics since the late 1940s, has an increasingly difficult relationship with the unions and that is raising the risk of strikes ahead of the October elections.

The combative president has divided Argentina's largest labor federation, the CGT, ostracizing leaders who became critical of her six-year-old government and recruiting more amenable replacements with whom to negotiate.

But a sharp slowdown coupled with inflation forecast by private economists to reach 30 percent this year is exposing cracks in her alliance with government-friendly unionists.

Galloping prices and a rising tax burden are eroding consumers' purchasing power, and even allied union leaders are unwilling to accept a 20 percent ceiling the government and companies want to set for wage claims.

"The unions are going to react," said Sergio Romero, secretary general of the UDA teachers union that belongs to the pro-government wing of the CGT.

"We went to the negotiating table with a flexible approach and what we got was a unilateral response. We expected a bigger effort from the state to improve the education system," he told Reuters. "The government is condemning teachers to survive on 3,000 pesos ($600) a month."

Members of Romero's union want a 30 percent pay rise, a demand shared by the large food industry union, which also belongs to government-friendly CGT ranks.
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